Thursday, May 24, 2018

Dairy Foods Innovation: Keep Milk and Dairy Foods Relevant through Emotional Connections and Value Propositions

Photo source: U.S. Dairy Export Council 

The National Restaurant Association held its annual expo this past week in Chicago.

As expected, meat alternatives and plant-based innovations were plentiful. In a presentation on foodservice trends, Nancy Kruse, president of The Kruse Co., an Atlanta-based restaurant consultancy, explained that as much as vegetables are now center-of-the-plate menu items and meat alternatives are mainstream, Americans are “committed carnivores.”

We are eating more meat and poultry than ever, according to USDA data.

“We love meat, but we would like it if you could make us feel a little better about it,” said Kruse. She cited McDonald’s recent national roll-out of fresh beef in Quarter Pounder burgers. “Tell me the story that makes me comfortable in making the choice I really want to make anyway.”

This holds true for dairy.

“Dairy alternatives are on a rise as consumers are increasingly going dairy-free, particularly when it comes to fluid milk used on things like cereal or in coffees,” according to Tom Bailey, senior analyst-dairy, Rabobank. “More recently, biotechnology has entered the arena, brewing milk proteins through biofermentation. The time is right for the dairy sector to reflect on the success of alternative dairy products and to consider applying those lessons to dairy.”

(If you have not heard of Perfect Day, a biotech firm brewing vegan milk proteins, link HERE.)

Bailey just authored a RaboResearch dairy report: Dare Not to Dairy--What the Rise of Dairy-Free Means for Dairy and How the Industry Can Respond. Link HERE for more information about the report. (My apologies, I was informed that I could not provide the link to the report, as I indictaed in the Daily Dose of Dairy email. You can reach out to Rabobank for more information.) The report is a MUST READ!

“Dairy alternatives have competed in the dairy space for decades, but competition has intensified as dairy alternatives broaden in types, styles and categories of product,” writes Bailey. “Hoping for the best and waiting for the tide to turn is not an advisable strategy for the dairy industry. Consumers have spoken. They want new and innovative quality products—dairy-based or otherwise—and they are willing to pay for them.”

This includes fiber- and protein-enriched products; lower-sugar and no-added-sugar products; and digestive (probiotics and prebiotics) products.

There’s no denying, global retail sales growth for dairy alternatives has soared at a rate of 8% annually the past 10 years. With retail sales valued at $15.6 billion, milk alternatives represented 12% of total fluid milk and alternative sales globally in 2017, according to Euromonitor.

“Nutrition, price and flavor tend to favor dairy, but changing consumer perceptions around health, lifestyle choices, curiosity and perceived sustainability are increasingly drawing more people to select dairy-free products,” writes Bailey.

The challenge for dairy lies mostly in fluid milk, where retail sales in Western Europe ($18.6 billion) and the U.S. ($12.5 billion) declined at an annual rate of 5% and 3%, respectively, in the five years to 2017, according to Euromonitor.

“Global demand for dairy is expected to grow by 2.5% for years to come, with demand for non-fluid categories offsetting weak fluid milk sales,” according to Bailey. “The results over the last five years have favored dairy players who have invested in milk alternatives across the supply chain, from planting almond trees to buying brands. The investments in dairy alternatives have shown returns above standalone dairy.”

The RaboResearch dairy report identifies the largest segment of consumers choosing dairy alternatives as being Millennials and Gen Z. Part of the reason dairy alternatives resonate with these groups is because marketers of these products connect and communicate with them on a more emotional level than traditional dairy foods marketers. The latter tends to be more facts and figures based, and that simply does not resonate with younger shoppers.

“Instead of fighting emotion with facts, the time has come to seriously consider implementing a new and possibly blended strategy,” writes Bailey. “The outlook for both dairy and alternatives remains bright through 2030, and perhaps even brighter together.”

He believes—as do I—the dairy industry needs to be more aggressive in product innovation. Value-added products provide a story that helps make that emotional connection.

Photo source: Blount Fine Foods

Here’s food for thought. Millennials and Gen Z love fresh soup. This was confirmed by exhibitors at the restaurant show. A driving force behind soups’ popularity with these younger demographics is that it’s familiar and comforting, while at the same time affordable. Soup also may be quite healthful, and for the most part, be simply formulated with fresh, local ingredients, qualities many Millennials and Gen Z are looking for in their prepared foods from retail and in foodservice.

Soup is also a low-risk item. Consumers can try new and interesting flavors without worrying about spending too much for something they may not enjoy. And soup is convenient.

Blount Fine Foods, one of the largest suppliers of prepared soups and mac and cheese to foodservice, including foodservice at retail, uses fluid dairy--not alternatives--in many of its products. And Millennials and Gen Z are eating it up.

The company identifies Guida’s Dairy as one of its preferred vendors. In 2017, Guida’s Dairy provided Blount with 10,708,859 lbs. of light cream; 5,769,470 lbs. of milk; 2,874,124 lbs. of heavy cream; and 1,210,933 lbs. of half and half.

Today’s consumers may be drinking less fluid dairy, but they are eating—or slurping—it!

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